A recent ruling by the New York Court of Appeals strictly limits a developer’s right to appeal a positive declaration under the State Environmental Quality Review Act (“SEQRA”). A “positive declaration” triggers the need for a draft environmental impact statement (“DEIS”) because there is a finding that the project has the potential to result in one or more significant adverse environmental impacts.

On March 31, 2016, the New York Court of Appeals issued its decision in Matter of Ranco Sand and Stone Corp. v. Vecchio, 2016 N.Y. Slip Op. 02477 (March 31, 2016).In Ranco, the Court clarified its 2003 ruling in Matter of Gordon v. Rush, 100 N.Y.2d 236 (2003), which permitted an aggrieved developer to immediately challenge a town board’s positive declaration under SEQRA without first having to prepare a DEIS and complete the SEQRA environmental review process.

The Gordon decision caused some confusion among the lower courts, prompting the Court of Appeals to revisit the issue in Ranco and clarify its prior ruling. As explained in Ranco, a positive declaration cannot be immediately challenged in an Article 78 proceeding unless the developer can establish at least one of the following:

The Ranco case arose after Ranco Sand and Stone Corp. applied to the Smithtown Town Board to rezone, from residential to heavy industrial use, one of two contiguous parcels Ranco owns. After the Town’s Planning Board and Planning Department recommended approval of the application, the Town Board, acting as lead agency under SEQRA, adopted a resolution issuing a positive declaration that rezoning the parcel “may have a significant effect on the environment”, which required Ranco to prepare a DEIS. Rather than endure the time and expense of preparing a DEIS – estimated to cost between $75,000 and $150,000 – Ranco promptly commenced an Article 78 proceeding against the Town Board. Ranco sought to annul the positive declaration as “arbitrary, capricious, and unauthorized” and requested an order directing the Town Board to process the rezoning application without a DEIS.

The Town Board moved to dismiss the petition for failure to state a cause of action. The Supreme Court, Suffolk County, granted the motion, finding that the matter was not ripe for judicial review. The Appellate Division, Second Department, affirmed. It concluded that the positive declaration was the initial step in the decision-making process rather than a final administrative determination and, therefore, did not give rise to a justiciable controversy. The Court of Appeals granted leave to appeal.

Two Requirements for Judicial Review

In referencing Gordon, the Court found that immediate judicial review of a determination was warranted when two requirements were satisfied:

1) The town board’s action had to “impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process.” This threshold requirement consisted of “a pragmatic evaluation . . . of whether the decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury.”

2) The apparent harm inflicted by the action “may not be prevented or significantly ameliorated by further administrative action or by steps available to the complaining party.”

The Court concluded in Gordon that the Board’s action was ripe for judicial review because both the above requirements were met. The Town’s positive declaration imposed an obligation on the developer to prepare and submit a DEIS after they had already been through the coordinated review process and a negative declaration had been issued by the DEC as lead agency. Moreover, it found that further proceedings would not remedy the injury caused by the unnecessary and unauthorized expenditures associated with conducting a DEIS.

In Ranco, the Court agreed that the Town Board’s positive declaration imposed an obligation on Ranco that satisfied the first requirement of the ripeness-for-review analysis. The Court failed, however, to find that the second requirement was met notwithstanding that the Court acknowledged Ranco could not recoup the costs and time incurred in preparing a DEIS, even if its application is ultimately successful.

In apparent recognition of its seemingly inconsistent application of the two-part test, the Court stated that when a positive declaration appears to be unauthorized, such as when a proposed action is not subject to SEQRA or when an administrative agency is not empowered to serve as lead agency, it might be ripe for judicial review. The Court concluded that because Ranco did not claim the positive declaration was unauthorized or that the action was not subject to SEQRA, and because it had not presented any other basis to find that the Town Board had acted outside the scope of its authority, its petition for judicial review was denied as being not ripe for judicial review.

In the Ranco decision, the Court of Appeals referenced its ruling in Gordon, wherein it found that a positive declaration was ripe for judicial review when two requirements were satisfied. First, the agency’s action had to “impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process.” This threshold requirement, the Gordon Court said, consisted of “a pragmatic evaluation . . . of whether the decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury.” To satisfy the second requirement, there had to be a finding that the apparent harm inflicted by the action “may not be prevented or significantly ameliorated by further administrative action or by steps available to the complaining party.”

In Gordon, the Court concluded that the Board’s action was ripe for judicial review. The Town’s SEQRA declaration imposed an obligation on the petitioners to prepare and submit a DEIS after they “had already been through the coordinated review process and a negative declaration had been issued by the DEC as lead agency.” No apparent further proceedings would remedy the injury caused by the unnecessary and unauthorized expenditures associated with conducting a DEIS.

The Ranco Court Clarifies and Limits its Prior Ruling

The Court in Ranco agreed that the Town Board’s positive declaration imposed an obligation on Ranco that satisfied the first requirement of the ripeness-for-review analysis. It failed, however, to find that the second requirement was met, despite the fact that the Court acknowledged that Ranco could not recoup the costs incurred and time spent on preparing a DEIS, even if its application is ultimately successful.

In apparent recognition of its seemingly inconsistent decisions and to avoid any further confusion, the Court specifically limited Gordon. It held that Gordon stands for the proposition that an immediate challenge to a positive declaration may be ripe for judicial review only where the positive declaration appears unauthorized, such as when the administrative agency is not empowered to serve as lead agency or a prior negative declaration obviates the need for a DEIS, or when the proposed action is not subject to SEQRA. The Ranco Court concluded that because Ranco did not claim the positive declaration was unauthorized or that the action was not subject to SEQRA, and because it had not presented any other basis to find that the Town Board had acted outside the scope of its authority, its petition was deemed not ripe for judicial review.

The Chilling Effects of Ranco

The Ranco decision significantly limits the situations in which an aggrieved party can commence an immediate challenge to the issuance of a positive declaration. Given the large financial expense and the considerable amount of work and time involved in preparing a DEIS, the Court’s ruling is likely to mean, in many instances, that a positive declaration will be the death knell of a project.

Perhaps more disturbing is the fact that aggrieved developers who believe their projects have been wrongly made the subject of a positive declaration must first pay tens or even hundreds of thousands of dollars for the right to bring an Article 78 challenge and will not have the ability to recoup those costs, even if they ultimately prevail in their claim.

Without any financial accountability for their actions, decision-makers who are critical of a development project can now use a positive declaration to advance an anti-development agenda under the guise that they are merely being diligent stewards of the environment.